AT&T Strikes $4.85 Billion Tower Deal With Crown Castle

AT&T Inc. (NYSE:T) agreed to lease or sell 9,700 of its wireless towers to Crown Castle International Corp. (NYSE:CCI) for $4.85 billion.

The deal is expected to bolster the largest U.S. phone company’s balance sheet.

AT&T Terms Of The Deal

Under the terms, AT&T Inc. (NYSE:T) would lease the rights to roughly 9,100 of its company-owned wireless towers to Crown Castle International Corp. (NYSE:CCI), with the latter purchasing about 600 AT&T towers.

The terms of the lease would facilitate Crown Castle to have exclusive rights to lease and operate approximately 9,100 AT&T Inc. (NYSE:T) towers, with the average terms of the lease rights spanning approximately 28 years. As the lease expires, Crown Castle will have fixed price purchase options, totaling about $4.2 billion, for these towers based on their estimated fair market values at the end of the lease terms.

In return, AT&T Inc. (NYSE:T) will sublease capacity on the towers from Crown Castle International Corp. (NYSE:CCI) for a minimum of 10 years for $1,900 per month per site, with a provision to increase rent by 2 percent per annum.

The largest U.S. phone company will also have access to additional reserve capacity on the towers for future use. The company anticipates the additional capacity will help it continue to meet growing demand for mobile Internet services.

Deal Size Closer To Earlier Figure

As reported earlier, AT&T Inc. (NYSE:T) was considering selling its data-carrying towers, as it seeks to rid itself of some under-performing assets in order to boost profitability. People familiar with the matter earlier anticipated the sale would fetch as much as $5 billion.

The sale marks the latest move in a series of mergers, acquisitions and divestments in the wireless data industry in the last year or two. The industry has changed completely with the rise of mobile devices and that has necessitated a change in the structure of their business.

Industry Witnesses Consolidation

Last month, American Tower was in a $4.8 billion acquisition deal with Global Tower Partners.

Similarly, Verizon Communications Inc. (NYSE:VZ) also announced its intention to buy the remaining half of U.S. carrier Verizon Wireless from Vodafone Group Plc (NASDAQ:VOD) (LON:VOD). Earlier this year, most of Sprint Corporation (NYSE:S) was sold to Softbank, a Japanese firm, and smaller U.S. carrier T-Mobile merged with PetroPCS Communications.

Scott Moritz & Serena Saitto of Bloombergbelieve that by selling towers, carriers can focus on more profitable parts of their businesses. By leasing the space on their sites to multiple carriers, the tower operators can squeeze more profit out of their assets.